Transit Insurance

Transit insurance covers physical loss or damage to goods while in transit between the point of despatch and the delivery destination. In Indian government procurement, transit insurance is often required for supply contracts where high-value equipment or materials must travel long distances to project sites.

What is Transit Insurance?

Transit insurance in India is effectively the domestic variant of marine cargo insurance. While marine cargo insurance covers both international and domestic transit, "transit insurance" is commonly used to describe domestic road and rail movements of goods to government sites, stores, or project locations.

In government supply contracts, transit insurance provisions specify:

• Who insures: The seller (for CIF/door delivery contracts) or the buyer-government (for ex-works contracts where the government arranges its own transport).
• Period of cover: From the time goods leave the supplier's premises until they are received, inspected, and accepted at the destination.
• Scope of cover: Typically All Risks for high-value items; FLEXA (Fire, Lightning, Explosion, Aircraft damage) plus overturning/collision for standard goods.
• Sum insured: Invoice value plus freight, insurance premium, and a percentage (commonly 10 to 15 percent) for anticipated profit and incidental costs.

For government contracts with delivery to multiple sites across India, such as pharmaceutical supply to government hospitals or electrical equipment to substations, suppliers often maintain an Open Transit Policy (also called a "floating policy") that automatically covers every consignment dispatched under the policy terms without requiring a separate policy for each shipment.

Why Transit Insurance matters for Indian government suppliers

India's road and rail network spans diverse terrain, from the Himalayan foothills to coastal highways, and transit risks are real. An overturned truck in a mountain pass can destroy INR 50 lakh worth of precision instruments. Without transit insurance, the entire loss falls on the party responsible for transit. Government contracts that do not explicitly require transit insurance still assign transit risk by their delivery terms: suppliers on CIF terms who fail to insure bear 100 percent of transit loss. For high-value supply contracts on CPPP or PSU portals, transit insurance is a cost of doing business, not an optional extra.

Example

A medical equipment supplier wins a central government hospital supply tender for diagnostic equipment worth INR 1.2 crore, to be delivered to three hospitals in hill districts. The contract is on door-delivery terms, making the supplier responsible for transit. The supplier obtains a transit policy under All Risks cover for INR 1.32 crore (110 percent of value). During delivery to the second hospital, a mudslide blocks the route and the truck is diverted, causing a minor collision that damages equipment worth INR 8 lakh. The supplier claims from the transit insurer and replaces the equipment, completing delivery within the extended timeline agreed with the procuring entity.

Frequently Asked Questions

What is the difference between transit insurance and comprehensive vehicle insurance?

Vehicle insurance (motor insurance) covers the vehicle against damage, theft, and third-party liability. It does not cover the goods being transported. Transit insurance specifically covers the cargo, the goods in the vehicle. Both policies are needed for complete protection.

Can a freight forwarder arrange transit insurance on behalf of a supplier?

Yes. Freight forwarders, logistics providers, and courier companies can arrange transit insurance on behalf of shippers. However, the supplier remains responsible for ensuring coverage is in place and adequate for the contract requirements.

Is transit insurance required on GeM orders?

GeM orders are typically on delivery terms where the seller ships via their preferred logistics provider. Transit risk and insurance responsibility depend on the GeM delivery terms. For high-value custom orders, transit insurance requirements are specified in the custom bid document.

What is the claim procedure for a transit loss?

Upon discovering loss or damage, the consignee must: (1) record the condition of goods in the delivery receipt before signing it "received in good condition," (2) notify the insurer within the time specified in the policy (usually 24 to 48 hours), (3) arrange a survey by an approved marine/transit surveyor before the goods are disturbed, and (4) file a formal claim with supporting documents.